Xero chance of subscription discounts for struggling businesses, says chief

Xero chief executive Steve Vamos has ruled out any reduction to the accounting platform's subscription costs for small businesses in distress as a result of the coronavirus pandemic.

"We thought a lot about this and we are pretty confident that as subscription businesses go, we offer incredibly flexible terms to our customers," Mr Vamos said from his home in New Zealand.

The boss of the $11.43 billion ASX-listed company said struggling small businesses could downgrade their subscription to go on a cheaper plan, suspend or cancel their subscriptions with 30 days' notice. Subscriptions start at $25 a month, rising to $150 a month for up to 100 users.

Xero chief executive Steve Vamos is running the accounting platform from lockdown in New Zealand. Credit: Brook Mitchell

Xero's share price dropped to $58.75 on March 23 from a February high of $90.22 as the implications of coronavirus for its small business customer base became clear. It has gradually climbed and was trading at $79.18 on Friday.

Mr Vamos acknowledged small businesses had been hit hard by the pandemic. More than 838,000 businesses have registered for the government's JobKeeper program, a $130 billion package to support the wages of up to 6 million Australians throughout the coronavirus crisis.

"I think it's pretty obvious to all of us that this is something that's affecting a lot of our businesses and ... hopefully we can get on top of this as quickly as we can and start to get back to business," he said.

Steve Vamos has ruled out a reduction to Xero's subscription charges. Credit: Ryan Stuart

Until coronavirus, Xero had been a stockmarket darling: its valuation on the ASX almost doubled over the past year and its half-year results released in November 2019 recorded a 32 per cent increase in revenue to $338.7 million.

However, it has proved resilient, with Morgan Stanley analysts noting Xero is not exposed to the same sales impacts as competitors given its 100 per cent software as a service model and online implementation and delivery.

In response to the crisis, Xero has strengthened its customer support efforts, committed to paying its suppliers within 10 days and has "pivoted" its product development to deliver crucial products including connecting JobKeeper to single touch payroll in Australia.

"We are now working to make it easy for customers to get access to JobKeeper and distribute the government funding to their employees really efficiently through the payroll system," Mr Vamos said. "So that's a really important product development that's under way and will be delivered, very very shortly."

Mr Vamos has been running Xero from his dining room in his Wellington apartment and during video conferences hangs a "global headquarters" sign from a Xero logo on the wall.

"I've been around a long time ... I've never seen anything that has as broad-based social and economic impact," said Mr Vamos, who experienced the dotcom crash at Ninemsn and the global financial crisis at Microsoft. "You can kid yourself about what you control and don't control, but really the mindset, in my view, that is most important is that of empathy and understanding what's happening around you," he said.

Working from home had not been too difficult for the majority of the Xero team which was used to working remotely, he said. "I very rarely have meetings with everybody in the room. I think less than 10 per cent of the time my meetings are physically with somebody in the same location."

Mr Vamos said the main change for him had been the lack of travel with New Zealand in a full national lockdown for the past three weeks. "My days are pretty close to the same as they always were except that I'm doing a lot less travel, so that is different. What's good about that is obviously you're at home or spending less time on the road," he said.

"But what's not so good, is you can't completely replace and never will be able to replace that human element of connecting with people and customers and partners."